Corporate Apologies

Given the amount of corporate apologies in the news, we weren't surprised when a reporter from thestreet.com approached us regarding an article they were writing on how to issue a sincere and effective apology in business.

They had some interesting questions for us and thought we would share them (and our answers) with you.

Why is the idea of a public apology so interesting to the American public? I ask because apologies seem to be huge news stories in and of themselves lately: e.g., Toyota Chief Apologizes and Tiger Woods Apologizes. Are corporate apologies so rare that they are newsworthy? Or is there just something about apologies that fascinates us?

We think both good and bad corporate apologies are newsworthy—bad apologies because they say something about the quality of the CEOs running these companies and, by extension, the wisdom of investing in their products. Good corporate apologies are newsworthy because they are so rare, and so impressive when done really well.

What is so surprising to us is the fact that, despite making so much sense for the bottom line, good business apologies are so rare. It is particularly surprising in light of the extensive research on the positive role of well crafted business apologies in protecting interests and expanding a customer or client base.

Apologies are also newsworthy for different reasons—Tiger's because of whom he is and the reputation he had prior to his catastrophic fall from grace.

Apologies are also fascinating because they often provide insights into people's personality that would otherwise remain hidden. Tiger, for example, was an incredibly private person—we now know much more about his personality (both good and bad) as a result of his public apology. But this same curiosity applies to gaining voyeuristic insights into the personalities business executives, celebrities or sports figures.

Clearly, corporate apologies are different from a personal ones for several reasons, not the least of which is the issue of legal liability (i.e., businesses may worry that if they admit they are wrong on the record, they may be opening themselves up to lawsuits.) There's also the idea that an apology is a sign of weakness. Is this a fair concern on the part of the business? Can you give some advice to business owners on how to apologize gracefully while still maintaining strength?

The question of legal liability is an interesting one that we have covered at length on our site, both in business and medical apology (litigation) settings.

Our view (widely shared) is that business leaders often worry too much about readily admitting mistakes. The mounting evidence seems to suggest that those who dismiss these concerns (typically pushed by lawyers) tend to weather the crisis much more effectively, often turning the crisis into a net gain. Yes, of course apologies can be seen as a sign of weakness, but that kind of honesty more often than not (based on our assessment of, for example, IT apologies) works to the company's benefit and is often perceived as a sign of strength BECAUSE they are willing to take these public relations risks. Toyoda paid the price because he listened to his lawyers.

Most business and specifically corporate apologies are crafted by lawyers, but they rarely have to be. Few corporate errors (or security breaches covered in our review of IT apologies in 2007 and 2009) result in any real harm to clients or produce any measurable costs that could serve as the basis for a credible (or actionable) legal case.

Waiting too long, as Toyota did, actually results in a far more significant net loss. Corporate apologies crafted by lawyers may deter some of the more determined (and misguided) customers from filing for damages. But the unintended consequences of issuing these very weak, legally scripted apologies is that they often alienate (and lose) many more customers than they deter.

With respect to advice to business owners on how to apologize gracefully while still maintaining strength, the answer depends on your perspectives regarding strength. Admitting a serious error, followed by acceptance of responsibility (with no caveats) and a commitment to compensate and fix the mistake IS a sign of strength—and will be interpreted as such by most observers, clients, customers and the media. CEOs who cower behind lawyers (the latter typically providing advice that serves their own benefit and interests, not the company's) are more likely to be perceived as weak, in our opinion.

With regard to apologizing to customers (both individually and public apologies) and to business partners, what are the keys to a good apology? On the other hand, what are the biggest mistakes that businesses can make when trying to apologize?

As for the apology itself, the guidelines for any perfect business apology include:

→ give a detailed account of the situation→ acknowledge the hurt or damage done→ take full responsibility→ recognize your role or the company's in the situation→ include a statement of regret→ ask for forgiveness→ promise that it won't happen again→ provide a form of restitution if possible

Timing is important when delivering an apology, but the first thing for many businesses to understand is that customer retention isn't built exclusively on satisfaction; it's built primarily on relationships—and like any successful relationship, respect and trust are fundamentally crucial. Respect and trust come from how we conduct and manage our daily business relationships, especially in difficult circumstances, and from the service businesses provide.

Unfortunately, our first instinct when faced with a customer complaint (or thousands in the case of Toyota) is to view the situation negatively, which is usually the last thing we should do. Instead, these 'crises' should almost always be viewed as an opportunity, a positive step towards customer retention. This is true not only for customers who voice these complaints but even more so for the many customers who experience a problem but don't complain. Many of them will still be looking to take their business elsewhere but won't provide a warning. As Bill Gates once said "Your most unhappy customers are your greatest source of learning".

Proactive apologies (in your words, OVER-apologizing) can actually be pivotal in customer retention by immediately addressing customers' concerns while earning their respect and trust. The primary elements of good business and corporate apologies that speak directly to customer loyalty are: ownership/responsibility for the mistake, some meaningful compensation/restitution, and an explanation of how the problem will be fixed to avoid any future recurrence.

Accepting full responsibility when apologizing for an error or inconvenience is key, followed by a clear, credible and quick solution, and then some form of restitution that lets the customer know they are valued.

The most important thing to keep in mind in terms of restitution is how it is perceived by the customer. This might translate into a dollar value or a more convenient way for your customer to patronize your business in the future. Either way, it's critical to know how the compensation is viewed by your customer. A customer who feels valued is more likely to translate those positive feelings into remaining a loyal customer and, more importantly will become an advocate for your business which, in turn, will have an ongoing positive impact on your bottom line.

These policies and related guidelines will also foster within companies a customer retention culture that stakeholders (employees, partners, customers) will find very appealing. As a result, customer retention strategies will be further entrenched throughout the company through a heightened awareness and appreciation of customer complaints that spans the front desk clerk to the executive suites.

What did you think of Tiger Woods' apology? Was it necessary? What did you think of Mr. Toyoda's apology regarding the problems at Toyota? What could the two of them done differently in order to mitigate negative responses?

We would evaluate the two apologies differently. Toyoda's apology was for thousands of products (expensive cars) that had faulty engineering&mdahs;it was delivered far too late and is now playing out in the context of an investigation into the deaths caused by the faulty accelerator (among other problems).

The fact that email surfaced in which Toyota executives were gloating for saving money by cutting back on the number of recalls made the crisis even worse. All this to say that this particular apology was a really tough one to do well, and Toyoda failed to satisfy many of the key ingredients listed above when he did deliver it—no clear acknowledgment of responsibility, just sorrow for those who may have been affected, and no reference whatsoever to compensation or restitution. The increasing number of recalls speaks to the absence of a clear commitment to really fix the many problems, and the smoking gun email didn't help.

Tiger is a golfer. We've covered the Tiger Woods apology at length on our blog and disagree with other 'experts' on this one.

What are some examples of very good and very bad public apologies?

There's a fine line between a perfect apology and groveling—we think Jetblue's BIG apology in 2007 (they've issued many since then) is a great example of a CEO getting very close to the perfection mark without going over the line.

We raise the JetBlue apology because it does give you an idea of the benchmarks when assessing strong, credible, and effective corporate apologies which meet most of the ingredients we emphasize throughout this site. We've also covered (and rated) several other examples of corporate apologies here and here.

In what situations is a written apology better than an oral apology? In what situations is it necessary to reach out in person? (Again, this is with regard to businesses.)

It depends largely on the 'content' of each apology rather than the context or form (although the latter are also important in some cases).

For example, a poor but lengthy written apology is not as good as a strong but brief oral apology. There are situations when one is better than the other, and in some cases both a letter and a phone call are in order.

Any approach that clearly satisfies the ingredients and conveys your intention to take seriously the issue at hand is a good start. Obviously, CEOs (when delivering corporate apologies) can't talk to everyone or send personal letters, so an official, well crafted and well-timed letter on the company website is often a great way to reach customers—as Amazon's CEO did when the company faced backlash for Kindle problems.

Is OVER-apologizing a good idea? I see some situations in which the apologizer takes the blame and the responsibility for things that were clearly out of the apologizer's control. Is this a good tactic to mitigate anger on the part of the victim? Or can apologizing too much result in the appearance of being disingenuous?

Over-apologizing in terms of constantly repeating the same or similar apologies IS a problem. It is certainly not a very wise approach to customer retention, because apology machines water down meaning and produce diminishing returns over time.

BUT over-apologizing in the sense of proactive apologies (described above)—essentially reaching out to pre-empt a backlash even if the company had no direct control—IS a good idea.